It’s sometimes really frustrating to read Gamasutra because the articles are very uneven even in the “featured” category. Case in point is this piece of gem, Hearthstone on Phones is Costing Blizzard Millions of Dollars where author tries to make the case that
Consequently, the above graph actually conceals a damning fact: Hearthstone’s phone release is losing Blizzard millions of dollars.
This is very interesting considering the graph shows that on mobile the game is generating as much as on PC. Blizzard is not in any sense of the word losing any money on the phone version.
The author’s viewpoint is that by having their own sales channel, game publishers and developers can enjoy a larger cut than by letting retail or digital middlemen like PSN, Steam and others take a cut. However, he totally forgets that very little of the gross revenue would be generated unless the game was available on these marketplaces in the first place.
It is very unlikely that Hearthstone would have doubled its revenues had it not come to mobile.
In his calculation of the value of “self-publishing” (the correct term would be closer to self-distributing), his only cost item for doing it yousrelf is a PayPal fee, though in reality there are many other things that the marketplace does for its 30% cut like simplifying doing business more than just handling purchase transactions and, most importantly of all, having the customers.
Skipping the 30% “Steam fee” is probably one factor why big publishers have their own PC channels like Origin, Uplay and Battle.net, but these are not free either. There is overhead in developing them, maintaining them, running servers and burning bandwidth to mention a few. One of the genius ideas of EA back in the day was realizing they did not need additional middlemen to get their games on storeshelves and the big publishers have optimized their supply chain ever since - even then they didn’t operate their own stores, though. Only EA and Blizzard have been able to resist the siren call of Steam on PC, and on the Xbox EA is doing some headway with EA Access.
The author’s other mistake is believing that players have migrated from PC to mobile. Although this is possible, it’s also likely that the players are just naturally churning and it’s easier - or even cheaper - for Blizzard to acquire users on mobile. You’ve probably seen World of Warcraft’s or Hearthstone’s banner advertising on web pages, or as the author links, on TV - that’s not free either. Given the frequent featuring from the app stores, Hearthstone has free visibility that it never could have on PC - unless maybe it was on Steam. This organic visibility is likely one key factor why many originally independently distributed PC games seem to find their way to Steam eventually, fe. recently Card Hunter and a little more back Path of Exile, just to name very random examples.
It’s also somewhat likely that after couple of years on the market, the addressable market on PC was saturated and the drop would have happened regardless. The graph does not tell us anything about the causes of the apparent “drop” in PC if that even happened - this is based on one data point and because it’s customary to use line graphs even on discrete data the last drop can look more dramatic than it is.
In short, the author totally misses the actual costs of running your own distribution channel, not only the overhead but also the size of your addressable market that is probably smaller than on the guys that charge the 30%. The main reason why publishers and developers are jumping on the marketplaces in the first place is because the customers are there. Blackberry once claimed that their app store was “more profitable” for developers because their cut was less than the usual 30%. Only in an irrelevantly technical sense this was true.
However, the author is also totally wrong by claiming that
However, the insane popularity of casual card games and social casino apps have held Hearthstone back in the iPad and iPhone card game charts, where the game often struggles to earn a spot in the ultra-lucrative top 10.
The game has been in (in the US) both the Top 10 grossing & downloaded card games since launch on iPhone, and Top 5 download on Google Play - and has held #1 spot on grossing since launch there. True, on the iPad, Hearthstone has hovered between ranks 15-25 on both lists. More importantly, the game is in Top 25 grossing for the whole games category on both iPhone and Google Play. This is very, very far from a struggle or a failure. I’m quite confident that the players are not struggling without the tooltip functionality here.
It’s impossible to tell from Superdata’s graph alone whether the phone release has earned Blizzard enough new revenue to offset the amount siphoned off by Apple, Google, Amazon, and other platform holders.
This hasn’t obviously stopped the author from making such claims, going as far as to claim that the mobile version is costing Blizzard. Another glaring error in the article is that the author claims
Blizzard is paying a substantial rake on their mobile earnings, which currently make up 60% of their revenue.
He probably means only Hearthstone here because Blizzard has a couple of other rather famous games in its portfolio. The 30% cut that is the standard on digital is not really considered as a “substanial rake” by anyone who was used to seeing less than half of the sales price through retail or other channels before digital stores like iTunes and Steam arrived. For a mere 30% cut, you get access to every iPhone owner’s pocket both literally and figuratively. To many that’s an insane deal.
The mass migration of the majority of a core PC game’s audience to mobile is practically unprecedented, much to the chagrin of Blizzard, who almost certainly didn’t anticipate that it would be this bad.
And it stays unprecedented, because I’m pretty confident that by launching on mobile, Blizzard was able to capture a new market and I’m pretty sure they didn’t anticipate things to be this great. The author doesn’t seem to be able realize that the potential market size on mobile more than dwarfs1 the PC market and there is very little proof of a mere zero-sum migration here. The only scratching the ActivisionBlizzard shareholders are doing is where to put all the money. From the company’s latest earnings result, the company saw doubling of key engagement metrics on Hearthstone “largerly from […] new platforms”.
It truly boggles the mind how this kind of stuff regularly makes its way to the “featured” section of Gamasutra.